California: Federal Arbitration Act Unenforceable in Employment Contracts for Employees Transporting Goods Outside the State


Employers with CA Employees


February 23, 2018


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A California Court of Appeal recently stated that the provisions of the Federal Arbitration Act (“FAA”) is unenforceable in employment contracts for employees who engage in interstate or foreign transportation, regardless of whether the employer is in the transportation industry.

In Muro v. Cornerstone Staffing Solutions, Inc., staffing firm Cornerstone hired Muro to drive for a third-party client in California. Muro’s employment contract contained a provision requiring all employment disputes to be resolved in arbitration, and required Muro to waive his rights to class action claims.

The court stated that Section 1 of the FAA exempts employment contracts of any class of workers engaged in foreign or interstate commerce.  Even though Cornerstone primarily provided staffing services, given that Muro’s duties regularly required transporting goods, it triggered the exemption from the FAA.  As a result, the court instead applied California law stating that the class action waiver provision in Muro’s contract was unlawful, and that Cornerstone could not compel Muro to arbitrate his wage and hour claims on a class basis. The court did not address whether it would have allowed arbitration of the class action claims to move forward, because the parties did not request it as a resolution.

Action Items

  1. Review employment contracts and arbitration agreements of workers engaged in interstate or foreign commerce with legal counsel.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2018 ManagEase

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